The central explanation for how monetary policy transmits to the real economy relies critically on nominal rigidities, which form the basis of the New Keynesian (NK) framework. This paper studies a different transmission mechanism that operates even in the absence of nominal rigidities. We show...

This paper shows how the empirical implications of incomplete markets models can be assessed using the same full-information methods that are commonly used for representative agent models. It then asks what features of the microeconomic insurance arrangement are important for understanding the...

This paper estimates the impact of parents' time investment in young children, their socioeconomic status and family structure on long-term outcomes of children. We developed and estimated a model of dynastic households in which altruistic individuals choose fertility, labor supply, and time...

The flow opportunity cost of moving from unemployment to employment consists of foregone public benefits and foregone utility from non-working time relative to consumption. Recent research uses a relatively high opportunity cost to generate volatile unemployment fluctuations in search and...

particular, financial intermediaries can invest resources to monitor the returns earned by firms. The inability to monitor perfectly leads to firms earning rents. Undeserving firms are financed, while deserving ones are under funded. A more efficient monitoring technology squeezes the rents...

the contribution of housing booms and busts to business cycles.

The paper examines the link between trade openness and the benefits of exchange rate flexibility under real foreign shocks and nominal rigidities. The benefits of exchange rate flexibility are defined as the welfare difference between outcomes under fixed exchange rates and under an optimized...

overall gains from openness.